Why housing is the crucial issue for Londoners

The capital’s population is set to grow by a million over the next decade. Where are they all supposed to live?

Tuesday 27 November 2012 11:39 BST

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What goes around comes around. In the run-up to the 1945 election, four out of 10 voters said housing was the most important issue facing the nation. You can be sure that Londoners were well represented: the city had more than its share of slums and bombed-out homes.

As new housing estates and private developments spread over the next 50 years, housing ceased to be a mainstream concern. But now that is changing — above all in the capital. Polling by the BBC in the run-up to this year’s mayoral election found that housing ranked in the top four issues that mattered most to Londoners, with crime, the economy and transport.

It’s not hard to see why. The credit crunch led to house prices falling in most places, as mortgages became harder to find. But the picture is different in London, where a growing population, relatively robust economy and limited space for new homes have driven house prices ever upwards. In an unforeseen twist, as the international banking system collapsed, London residential property became a new global gold standard — most new homes are now sold to overseas buyers.

The difficulty in getting a mortgage and the rise in prices has forced more and more people to rent: as the Standard reported last Friday, for the first time in generations there are more rented than owner-occupied homes in London.

The average age of first-time buyers in London is now close to 40. Rents have risen accordingly. A new Shelter-Mori survey finds that six out of 10 young renters expect never to be able to own a home.

The rise in house prices is affecting much more than whether young Londoners get to rent or buy. The general law is that as a nation or a city gets richer, so it gets less densely settled — people choose to live apart and homes expand. Yet London has been bucking this trend as homes get ever smaller and more people squeeze into each one.

I’ve heard urbanists and economists suggest, sotto voce, that what is going on in London is not necessarily so bad. The more successful a city, the argument goes, the more people will want to live in it. Better to be a victim of success than a victim of failure. If London becomes too expensive for ordinary middle-income earners, they can move elsewhere, helping “rebalance” the UK’s economy in the process. Density also brings environmental benefits — the more crowded a city, the less it pollutes.

But these arguments are too easy. High housing costs hit the economy hard. There is no guarantee that as prices increase, firms and individuals will move to other parts of the UK — many of them will move abroad. That’s why, in a presentation at Today’s London Conference, McKinsey identifies “constraints in the long-term growth of housing stock” as one of the key issues that could undermine London’s competitiveness.

Of course, high accommodation costs don’t just affect middle-class Londoners — they have knock-on effects down the income scale. As Trust for London’s excellent London Poverty Profile says: “Housing costs are important in explaining why London has the highest poverty rates of all England’s regions.”

Doubtless as more people rent, and as large-scale investors move into the rental market, so renting will lose some of its negative associations. But the fact remains that most people aspire to own a home at some point in their lives: figures released this month show that 80 per cent of young private renters would prefer to buy their homes. And while it’s true that high density living brings some environmental benefits, it will take a lot more than this to reconcile many of us to it. Despite the popularity of places like Hackney, most Londoners aspire to a home in the suburbs or beyond.

This is not news to the political class. Promises to increase building, especially of affordable homes, featured large in the last general election manifestos, as they did in those of Ken and Boris in the last mayoral election.

Yet politicians and public alike have some way to travel before they understand the scale of the London challenge. The census figures released this summer should in particular have been a wake-up call.

Both Ken and Boris have been committed to containing London’s population within its borders. This was always an ambitious strategy. It became more ambitious still once the financial crisis hit. Ken’s and Boris’s plans depended on heavy government investment in regenerating sites like Barking Reach. The Olympics indicated we can do this sort of regeneration but it costs public money and that is in short supply.

But with new figures showing London growing by more than a million in the next decade — nearly twice the rate being predicted 10 years ago — the plan to contain the city within its borders looks very ambitious indeed.

Boris still talks as if we have the space but his planners must be scratching their heads and wondering where all the new homes will go. Squeezing them all into London’s existing boundaries will mean building at densities significantly higher than previously countenanced.

One obvious answer is to look beyond London. But despite Nick Clegg’s brave promises last week to create a generation of new towns, it’s hard to see this happening — at least if we continue with present policies. There is no forum for bringing together central government, London and surrounding councils to develop a strategic approach for accommodating London’s growth. On the contrary, the Government has abolished the weak frameworks that were in place and has put its faith in local communities working it out for themselves.

Boris Johnson has spend the past few months developing and consulting on a new “2020 Vision” for London, to be launched early next year. It badly needs to recognise the scale of London’s housing challenge and think beyond existing, increasingly inadequate strategies for tackling it.

Ben Rogers is director of the Centre for London, which, with IPPR, is hosting today’s London Conference at the Royal Festival Hall (londonpolicyconference).